Better Homeowners
Selling Colorado and the Colorado Lifestyle

Temporary Buydowns: What Happens to Unused Funds If You Sell or Refinance Early? - 9/17/2025

A temporary buydown is a great tool to help ease into homeownership with lower initial monthly payments, especially helpful in a high-rate environment. It allows you to enjoy reduced payments in the first one to three years of the loan, offering financial flexibility as you settle into your home.

With a buydown, the upfront cost is used to offset the difference between your actual mortgage payment (based on the full note rate) and the reduced payment you're allowed to make under the buydown terms. That difference is funded by a lump sum, typically paid by the seller, builder, or sometimes the borrower, and held in an escrow account by the lender or servicer.

For example, in a 2-1 buydown, the lender still loans the full amount at the note rate for the entire term of the mortgage. However, for the first year, the borrower makes payments as if the rate were 2% lower, and in the second year, 1% lower. The escrow account makes up the difference between what the borrower pays and what the loan actually requires, ensuring the lender receives the full payment due.

But What If You Sell or Refinance Before the Buydown Period Ends?

Here's the good news: If you sell or refinance the home before the buydown period is over, the unused portion of that escrow fund doesn't disappear, it typically comes back to you.

Since the funds were set aside to reduce your mortgage payments and you're no longer making those payments, the remaining balance in the buydown account is credited back to you at closing. It's your money, or a seller or builder credit given on your behalf, and once it's no longer needed for payment support, it returns to you.

It's always wise to confirm the terms with your lender or loan servicer, but most buydown agreements include this provision.

The Bottom Line

A temporary buydown offers upfront savings and long-term flexibility. And if your plans change, whether you sell or refinance early, you won't lose the benefit of the unused funds. It's just another way this strategy helps you manage your mortgage more efficiently, while keeping more money in your pocket.

Kathleen Harken CRS, GRI, SFR, AHWD Keller Williams Realty DTC Englewood, CO (303) 909-5990 My introduction to the world of real estate came at an early age, working alongside my father in the industry. This early exposure instilled in me a deep appreciation for the intricate dynamics of the field. After brief detours into investment banking, mortgage lending, and marketing, I found my true calling in real estate in 1995. My diverse background equips me with a unique perspective that I use in crafting informed and strategic solutions for my clients. With each client I serve, my primary goal is to cultivate a tailored and educational experience. I understand that every individual approaches the real estate process with distinct aspirations and requirements. My dedication to client education stands as a cornerstone of my practice. I firmly believe that an informed client is an empowered one. I take the time to elucidate the intricate details of the buying and selling process, ensuring that my clients make decisions with confidence and clarity. This commitment to education extends to navigating the ever-evolving market landscape, equipping clients with insights that enable them to make confident choices. I've also been an active participant in the real estate community. Serving as Chairman of the Board at the local board of REALTORS in 2005-2006, a state director at the Colorado Association of REALTORS, and roles in the Colorado state CRS chapter, I continually seek ways to contribute and stay attuned to industry trends and best practices. While my professional commitment is unwavering, I also relish the Colorado outdoors and adventure that comes with it. Whether scaling Colorado's peaks or enjoying the camaraderie of a hockey game, or a bike ride/run on one of the many trails around the city, I find solace in the exhilaration of these pursuits. And, amidst all these ventures, my greatest adventure has been the 25+-year journey of marriage to my husband, Dale, and our shared commitment to fostering and raising large breed dogs. A unique fact about me is my non-skiing status ... a quirk that adds a touch of individuality to my Colorado roots. With a profound dedication to professionalism, client education, and a keen understanding of market trends, I offer a comprehensive experience that places the client at the forefront. Navigating the real estate landscape can be complex, but with my guidance and educational approach, my clients are empowered to make informed choices that align with their goals. Contact Me Visit my Website Send a Referral Subscribe to Newsletter